The British Virgin Islands (BVI) has enacted the Beneficial Ownership Secure Search System Act 2017 (BOSS Act). The Act came into effect on 30 June 2017. The BOSS Act was almost immediately amended by the Beneficial Ownership Secure Search System (Amendment) Act 2017, which also came into force on 30 June.
The BVI is an important offshore jurisdiction and international tax and law enforcement authorities believe that the corporate veil is used for fraudulent practices. The enforcement of the act is aimed to clamp down tax evasion, money laundering, and terrorism financing.
Under section 9(6) of the BOSS Act, there is a disclosure obligation for all BVI companies to provide updated beneficial ownership information.
A BVI company that fails to comply with this section commits an offense and may be subject to a fine up to US$250,000 or to imprisonment for a term not exceeding 5 years, or both.
Background
The Exchange of Notes Agreement facilitates the sharing of information relating to beneficial ownership between the BVI and the UK government.
The Beneficial Ownership Secure Search System (BOSS) System, will enable the authorities to have a searchable database of BVI entities and their ownership details.
In conjunction with the Anti-Money Laundering Act (AML Act), entities in BVI are required to comply with the KYC obligations as prescribed under the AML Act. Thus, the BOSS Act in combination with the AML Act requires entities to collect and record KYC on natural persons who directly or indirectly control 10% or more of the shares or voting rights of a legal entity. At all processor plays the big roll of a legal consultant.
Key Provisions
These are the key provisions that will directly affect your BVI or potential BVI Company.
| 1. | All BVI companies must comply with the requirements of the BOSS Act. The Amendment Act made clear that entities that have ceased to exist, or were struck off before 1 January 2016 do not need to comply with the BOSS Act. |
| 2. | Beneficial ownership information on each company must be added to the system; |
| 3. | An entity shall identify any person who is a beneficial owner or registrable legal entity and notify the registered agent of that information within 15 days of identifying such person or entity. The penalties for non-compliance by an entity may reach a fine not exceeding US$250,000, imprisonment for a term not exceeding 5 years or both. In addition, providing false information can lead to a fine of up to US$75,000, up to 5 years’ imprisonment or both. |
| 4. | An entity must within 15 days of becoming aware of a change in any of the prescribed information relating to beneficial owners notify the registered agent of such changes and the dates that they took place. Penalties for a breach can reach US$10,000. In addition, proving false information can lead to a fine of up to US$75,000, up to 5 years’ imprisonment or both. |
| 5. | Definitions under the BOSS Act. |
The definition of a ‘beneficial owner’ is set out in full in section 6 of the BOSS Act, and the definition of a ‘registrable legal entity’ is set out in section 8
Beneficial owner
A ‘beneficial owner’ is defined as a natural person who ultimately owns or controls a legal entity and includes, though is not restricted to:
| (a) | a natural person who ultimately owns or controls, whether directly or indirectly, 25% or more of the shares or voting rights in the legal person; |
| (b) | in the case of a legal person, a natural person who otherwise exercises control over the management of the legal person; |
| (c) | in the case of a legal arrangement: |
| (i) | the partner or partners who control the legal partnership; |
| (ii) | the partner or partners who control the legal partnership; |
| (iii) | the settlor or another person by whom the legal arrangement is made. |
Where two or more persons hold any qualifying interest jointly, whether as joint tenants or tenants in common, then each joint owner shall be the beneficial owner.
Registrable legal entity
A ‘registrable legal entity’ in relation to a company is a legal entity which:
| (a) | would be a beneficial owner of a company if it were an individual; and |
| (b) | one or more of the following apply to it: |
| (i) | it is a mutual fund under the Securities and Investment Business Act, 2010 or its subsidiary; |
| (ii) | it is an entity whose shares or securities are listed on a recognized stock exchange or a subsidiary of such an entity; |
| (iii) | it is a licensee or foreign regulated person; or |
| (iv) | it is a sovereign state or a wholly owned subsidiary of a sovereign state. |
Prescribed information
For each company, the information to be included in the BOSS register is as follows:
| (a) | the particulars of each company including: the name (including alternative names); incorporation number (or Equivalent); date of incorporation; status; registered address; and registered address; |
| (b) | with respect to each beneficial owner: name; residential address; date of birth; and nationality; and |
| (c) | with respect to each company: the details of the entity as outlined in (a); jurisdiction of incorporation; the basis on which the entity is a registrable legal entity; the name of the regulator (if any); and the name of the sovereign state (where the registrable legal entity is a sovereign state or a subsidiary of a sovereign state). |
Please feel free to contact us if you require additional information regarding BVI companies and the BOSS Act.